Who Will Be Able to Afford Health Insurance in the Future?

March 21, 2012

For more than a decade, the rate of growth of health care premiums has far exceeded the growth of average American household incomes. Given these trends, projections regarding the portion of a household's income that is consumed by health care expenses inevitably predict increases over the course of the next few decades, say Richard A. Young, a doctor in Fort Worth, Texas, and Jennifer E. DeVoe of the Oregon Health Science University.

From 2000 to 2009, the average annual increase in insurance premiums was 8.0 percent while household incomes rose an average of only 2.1 percent annually.

Though the rate of increase for premiums slowed during the second half of the last decade, household incomes dipped sharply during the recession.

If health insurance premiums and national wages continue to grow at recent rates, the average cost of a family health insurance premium will equal 50 percent of the household income by the year 2021; it will surpass household income by 2033.

If out-of-pocket expenses are also included, these benchmarks move forward to 2018 and 2030, respectively.

It bears mention that employers almost always pay a portion of employees' premiums, and therefore the burden on families is not as high as these figures might suggest. However, even this fact does not completely mitigate the burden of growing premiums.

A 2010 Kaiser Family Foundation found that 30 percent of employers reported having reduced the scope of health benefits or increased cost sharing.

Additionally, 23 percent reported increasing the share of the premium that the employee has to pay.

Given these trends, the employee contribution to a family premium plus out-of-pocket costs will comprise one half the household income by 2031 and total income by 2042.

These rising costs for individual policyholders do not reflect the burden of growing expenditures on the economy as a whole, as they fail to account for the increasing burden imposed by Medicare and Medicaid as well.

Source: Richard A. Young and Jennifer E. DeVoe, "Who Will Have Health Insurance in the Future? An Updated Projection," Annals of Family Medicine, March/April 2012.